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RBA Minutes: Conditions for rate hike won’t be met until 2024

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    ActionForex.com
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    In the minutes of July 5 meeting, RBA reiterated that the “central scenario implied that the conditions for an increase in the cash rate would not be met until 2024”. However, “fast-than expected” recovery over the course of 2021 had “widened the range of alternative plausible scenarios for the economic outlook”, and thus, “the cash rate over the period to November 2024”. Hence, it decided to retain April 2024 bond as the target bond, rather than extending the horizon to November 2024 bonds.

    On the decision on the size of weekly bond purchases, it noted that “the economic outcomes had been materially better than earlier expected and the outlook had improved”. And, “in light of these improvements and the agreed decision-making framework, members decided to adjust the weekly purchases from $5 billion to $4 billion and agreed to review the rate of purchases at the November 2021 meeting.”

    Full minutes here.

    Chinese Yuan nosedives to year low amid deepening property sector concerns

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      The Chinese Yuan nosedived to its lowest mark this year, echoing growing anxieties that spread from the real estate domain to the financial sector. Fueling this downturn, JPMorgan Chase & Co. rang alarm bells today, highlighting heightened liquidity strains for debt-ridden developers and their non-bank stakeholders. This follows a notable hiccup by a subsidiary of Zhongzhi Enterprise Group Co., which stands among China’s premier private wealth management entities. The said unit stumbled in ensuring timely payments across multiple products.

      These defaults in the trust sector could potentially trigger a detrimental cycle impacting the onshore debt of privately-owned enterprise developers. The escalating apprehensions regarding potential developer defaults have soured the investment climate. Consequently, trust entities may either find it challenging or may express reluctance in rolling over existing products tied to real estate.

      USD/CNH’s break of 7.2853 resistance confirms resumption of whole rally from 6.6971 (Jan low). Purely technically speaking, current rise should target 7.3745 resistance first (2022 high), and then 61.8% projection of 6.8100 to 7.2853 from 7.1154 at 7.4091. However, market watchers are most intrigued by a looming question: When will China’s authoritative bodies intervene to arrest the Yuan’s descent?

      SNB Zurbruegg: Exchange rate situation still very fragile, current monetary policy has to continue

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        SNB Vice Chairman Fritz Zurbruegg said in a Schaffhauser Nachrichten newspaper interview that when EUR/CHF was at 1.2, there came the ” the impression that everything is solved and the pressure is gone – the franc is no longer a safe haven”. However, then, “you can see that the franc reacts very quickly as long as there are uncertainties.” That showed the “exchange rate situation is still very fragile”. Therefore, SNB policymakers are “convinced we have to continue with our current monetary policy.”

        Also, he noted the central bank is not considering to reduce its balance sheet yet. He said “there are risks that we have accepted to fight against the over-valuation of the franc, and we can live with that. And, “the size of our balance sheet doesn’t limit our ability to act and we have shown that we are still ready to intervene in the currency markets if necessary.” He added “that’s why there is no talk at present about reducing this portfolio.”

        Eurozone exports rose 28.9% yoy in May, imports rose 52% yoy

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          ActionForex.com
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          Eurozone exports of goods to the rest of the world rose 28.9% yoy to EUR 248.5B in May. Imports of goods rose 52.0% yoy to EUR 274.8B. Trade deficit came in at EUR -26.3B. Intra-eurozone trade rose 33.0% yoy to EUR 231.6B.

          In seasonally adjusted term, exports rose 4.8% mom to EUR 241.8B. Imports rose 2.0% mom to EUR 267.8B. Trade deficit narrowed from April’s EUR -31.8B to EUR -26.0B, slightly smaller than expectation of EUR -26.3B. Intra-eurozone trade rose from EUR 217.2B to EUR 221.4B.

          Full release here.

          Fed Bullard: Policy rate not yet sufficiently restrictive

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            ActionForex.com
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            St. Louis Fed President James Bullard said, “even under these generous assumptions, the policy rate is not yet in a zone that may be considered sufficiently restrictive”. And, “to attain a sufficiently restrictive level, the policy rate will need to be increased further.”

            “Thus far, the change in the monetary-policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023,” Bullard said.

            UK retail sales volumes rises 1.3% mom in Nov, sales value up 1.0% mom

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              UK retail sales volumes (quantity bought) rose 1.3% mom in November, well above expectation of 0.4% mom. Ex-automotive fuel sales values rose 1.3% mom. Over the year, sales volumes rose 0.1% yoy while ex-fuel sales volume rose 0.3% yoy.

              Sales value (amount spent) rose 1.0% mom, 3.8% yoy. Ex-fuel sales value rose 1.2% mom, 5.7% yoy.

              Full UK retail sales release here.

              BoE Haldane: Plenty of scope for vaccine to release more of pent-up demand

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                ActionForex.com
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                BoE Chief Economist Andy Haldane told the Daily Mail newspaper that as people’s incomes held up and spending was restrained by the coronavirus restrictions, “they have amassed around £100billion of excess savings.” People are using their “involuntarily-accumulated savings” on a new house or a new car, and there are “plenty of those savings still to be used.”

                Households have shown “unbelievable resilience” and consumer spending has “come back at real pace”. People are also flexible as “they are not going to the pubs and restaurants, but they have switched to takeaways and patio heaters.”

                Haldane believed that the roll out of the Pfizer/BioNTech COVID-19 vaccine could deliver a boost to the economy. “There is plenty of scope there for the vaccine to release more of that pent-up demand.”

                Germany Q1 GDP contraction finalized at -1.8% qoq, still down -5% from pre-pandemic level

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                  ActionForex.com
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                  Germany Q1 GDP contraction was finalized at -1.8% qoq. It’s down -3.4% yoy on price-adjusted bases, down -3.1% yoy on price- and calendar-adjusted bases. Comparing prepandemic level in Q4 2019, GDP was still down -5.0%.

                  Looking at some details, household final consumption expenditure was down -9.1% yoy. Gross fixed capital formation did not contribute to year-on-year growth. Fixed capital formation in machinery and equipment dropped -0.7% yoy, and in construction by -1.6% yoy. Government final consumption rose 2.5% yoy. Exports of goods and services dropped -0.6% yoy. Total imports dropped -3.0% yoy.

                  All sectors were down on a year earlier. In particular, services dropped -13.9% yoy. Gross value of manufacturing was still down -1.2% yoy despite improvement in the second half. Information and communications was the only sector that saw noticeable growth of 0.7% yoy.

                  Full release here.

                  UK GDP shows modest 0.2% mom growth in Aug, services the sole contributor

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                    ActionForex.com
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                    UK’s GDP data for August reveals a mixed bag of results, characterized by modest growth and a sector-specific performance variance. The economy grew by 0.2% mom, aligning with market expectations

                    Dissecting the numbers, the services sector emerges as the sole contributor to GDP growth, registering a 0.4% mom increase. Contrastingly, the production output faced a downturn, shrinking by -0.7% mom , while the construction sector similarly contracted by -0.5% mom .

                    In a more expansive view, the 0.3% rise in GDP over the three months leading to August paints a picture of gradual, albeit inconsistent, economic expansion.

                    In this three months period, production led the charge with a 1.2% increase, highlighting a resilient manufacturing and industrial segment that counters the monthly dip in August. Construction also showed promise with a 0.9% rise, indicating a level of sustained activity in infrastructure development over the quarter. Services, though only increasing by a marginal 0.1%, maintained its positive contribution.

                    Full UK GDP release here.

                    Canada CPI rose to 6.7% yoy in Mar, highest since 1991

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                      ActionForex.com
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                      Canada CPI rose 1.4% mom in March, above expectation of 0.9% mom. That’s the largest monthly increase since January 1991. For the 12-month period, CPI accelerated from 5.7% yoy to 6.7% yoy, well above expectation of 6.1% yoy. That’s also the largest annual rise since January 1991.

                      CPI common rose from 2.7% yoy to 2.8% yoy, above expectation of 2.7% yoy. CPI median rose from 3.5% yoy to 3.8% yoy, above expectation of 3.5% yoy. CPI trimmed rose from 4.4% yoy to 4.7% yoy, above expectation of 4.3% yoy.

                      Statistics Canada said: “Inflationary pressure remained widespread in March, as prices rose across all eight major components. Prices increased against the backdrop of sustained price pressure in Canadian housing markets, substantial supply constraints and geopolitical conflict, which has affected energy, commodity, and agriculture markets.”

                      Full release here.

                      China CPI turned positive in Dec, PPI deflation flowed to -0.4% yoy

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                        ActionForex.com
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                        China’s CPI turned positive to 0.2% yoy in December, up from -0.50% yoy, above expectation of 0.1% yoy. Core CPI, excluding food and energy, stood at 0.4% yoy, down from 0.5% yoy.

                        “Ahead of New Year’s Day and the Spring Festival, consumer demand increased, and feed costs also rose,” said Dong Lijuan, a senior statistician at the NBS. “At the same time, affected by unusual weather and rising costs, the CPI turned from a decline into an increase.”

                        PPI dropped to -0.4% yoy in December, up from November’s -1.5% yoy, higher than expectation of -0.8% yoy. That’s also the slowest factory gate deflation since last February.

                        US durable goods orders rises 2.6% mom in Mar, ex-transport orders up 0.2% mom

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                          ActionForex.com
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                          US durable goods orders rose 2.6% mom to USD 283.4B in March, above expectation of 2.5% mom. Ex-transport orders rose 0.2% mom to USD 187.5B, below expectation of 0.3% mom. Ex-defense orders rose 2.3% mom to USD 268.1B, above expectation of 2.0% mom. Transportation equipment orders rose 7.7% to USD 95.9B.

                          Full US durable goods orders release here.

                          CAD/JPY eyeing 87.87 resistance as WTI breaches 75 handle

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                            ActionForex.com
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                            WTI crude oil extends near term rally in Asians session and breaches 75 handle. Oil price has been lifted since late August, on improving demand as well as supply tightness. On the one hand, demand is set to picking up with easing of pandemic restrictions, and more importantly, border restrictions. Additionally, surging gas prices are also driving oil higher. On the other hand, OPEC+ seems to be lagging behind the demand rebound, due to under-investment during the pandemic as well as maintenance delays. The question is whether WTI could power through 76.38 high made back in July, and that remains to be seen.

                            Riding on last week’s rally in oil prices and resilient risk appetite, CAD/JPY is also extending the rebound from 84.88. 87.87 resistance is now an immediate focus. Sustained break there will argue that whole correction from 91.16 has completed at 84.65 already. Break of 88.44 resistance will affirm this case and pave the way to retest 91.16 high. More importantly, with 38.2% retracement of 73.80 to 91.16 at 84.52 well defended, the medium term up trend from 73.80 could be ready to resume in this bullish scenario.

                             

                            US initial jobless claims dropped to 239k, vs exp. 265k

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                              ActionForex.com
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                              US initial jobless claims dropped -26k to 239k in the week ending June 24, below expectation of 265k. Four-week moving average of initial claims rose 1.5k to 257.5k, highest since November 13, 2021 when it was 260k.

                              Continuing claims dropped -19k to 1742k in the week ending June 17. Four-week moving average of continuing claims dropped -13k to 1758k.

                              Full US jobless claims release here.

                              Into US session: Canadian Dollar recovers ahead of BoC, FX decoupled from risk markets

                                By
                                ActionForex.com
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                                Entering into US session, Sterling is trading as the weakest one today, followed by Japan Japanese Yen. On other hand, New Zealand Dollar and Canadian Dollar are generally higher. The forex markets seem to have decoupled from risk sentiments today. But we’d reckon recoupling soon. BoC rate decision will be a focus in US session and it’s widely expected to save bullet for October. US-Canada trade negotiation will resume in Washington today and that will also catch some attention.

                                In other markets, major European indices are in red today, with FTSE down -0.33%, DAX down -0.58%, CAC down -0.85%. Earlier today, Hong Kong HSI closed down -2.61%, China Shanghai SSE down -1.68%, Nikkei down -0.51% while Singapore Strait Times fell -1.69%. WTI crude oil once again failed to stay above 70 handle and is now back below 69. Gold is now defending 1190 as near term consolidation extends.

                                Japan machine orders rose 17.1% mom in Oct, largest monthly jump since 2005

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                                  ActionForex.com
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                                  Japan machine orders rose 17.1% mom in October, well above expectation of 2.8% mom. That’s also the largest month-on-month rise on record since 2005. By sectors, manufacturing orders rose 11.4% mom while non-manufacturing rose 13.4% mom.

                                  The data affirmed the improving trend in capital expenditure. Investments could be further boosted ahead by the government’s Fresh JPY 40T stimulus. Yet, the volatile series is up for revision while the exporters might continue to struggle to gain momentum due to global weakness.

                                  Eurozone economic sentiment rose to 117.8, employment expectation rose to 113.6

                                    By
                                    ActionForex.com
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                                    Eurozone Economic Sentiment Indicator rose slightly from 117.6 to 117.8 in September, above expectation of 116.9. Employment Expectation Indicator rose 0.8 pts to 113.6, highest since 2018. Industrial confidence rose from 13.8 to 14.1. Services confidence dropped from 16.8 to 15.1. Consumer confidence rose from -5.3 to -4.0. Retail trade confidence dropped from 4.6 to 1.3. Construction confidence rose from 5.5 to 7.5.

                                    EU ESI was unchanged at 116.6 while EEI rose 1 pt to 113.6 (highest since 2018). Amongst the largest EU economies, the ESI rose in Spain (+1.7), Germany (+0.8), the Netherlands and Poland (both +0.6), while it worsened in France (-1.3) and Italy (-0.9).

                                    Full release here.

                                    Eurozone exports rose 18.2% yoy in Aug, imports rose 26.6% yoy

                                      By
                                      ActionForex.com
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                                      Eurozone exports of goods to the rest of the world rose 18.2% yoy to EUR 184.3B in August. Imports rose 26.6% to EUR 179.5B. Trade surplus came in at EUR 4.8B. Intra-Eurozone trade also rose 21.2% yoy to EUR 155.5B.

                                      In seasonally adjusted term, Eurozone exports rose 0.3% mom to EUR 200.6B. Imports rose 1.6% mom to EUR 189.4B. Trade surplus narrowed to EUR 11.1B. Intra-Eurozone trade rose from 179.4B to 181.2B.

                                      Full release here.

                                      Germany retail sales rose 3.5% in Jun, unemployment rate unchanged at 5% in Jul

                                        By
                                        ActionForex.com
                                        -

                                        Germany retail sales rose 3.5% mom in June, well above expectation of 0.5% mom. Over the year, retail sales dropped -1.9% yoy. Compared with the previous year, turnover in retail trade was in the first six months of 2019 in real terms 2.2% higher than in the corresponding period of the previous year.

                                        Also from Germany, unemployment rose 1k in July versus expectation of 2k. Unemployment claims rate was unchanged at 5.0%, matched expectations.

                                        ECB de Cos: Uncertainty around inflation very high due to geopolitical risks

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                                          ActionForex.com
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                                          ECB Governing Council member Pablo Hernandez de Cos said “risks to inflation are tilted to the upside in the short term.” Recent data on Recent data on inflation has shown surprising upwards trends both in headline inflation and core inflation. He added, that the level of uncertainty around inflation is very high also due to geopolitical risks.

                                          De Cos emphasized that more than ever it is necessary to keep all options open on monetary policy. But for now, ECB policymakers are sticking to the sequencing, starting first with tapering, before raising interest rate.

                                          He added, that the next move on monetary policy is clear but will be gradual and depend on data.

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